The Daily Dish

When the U.S. housing bubble burst the aftershocks were at the heart of the financial crisis and Great Recession, so you might think that policymakers would avoid at all costs the kinds of policies that fed the housing bubble. Enter the Federal Housing Administration (FHA), which yesterday put into effect a 0.50 percent (50 basis points) reduction in the premiums borrowers must pay for taxpayer-backed FHA mortgage insurance.

Reducing FHA Premiums: Policy & Market Implications

In laying out his Administration’s agenda for 2015, President Obama announced in early January that the Department of Housing & Urban Development (HUD) would reduce Federal Housing Administration (FHA) mortgage insurance premiums from 1.35 percent to 0.85 percent. While some have labeled the announcement “welcome news for prospective FHA borrowers,” the costs merit further exploration; HUD’s decision will certainly affect FHA’s finances and lead to an expanded government role in the mortgage market.

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